Treasury Secretary Tim Geithner, Speaker of the House John Boehner Talk Debt Ceiling Deadline

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The following is a rush transcript of the July 24, 2011, edition of "Fox News Sunday With Chris Wallace." This copy may not be in its final form and may be updated.

CHRIS WALLACE, ANCHOR: I'm Chris Wallace.

It's the dog days of summer in Washington and the grand bargain has now become the great divide.

(MUSIC)

The country's top leaders rush to restart negotiations that are broken down. As the debt ceiling deadline draws near, can default be avoided? Is an agreement still possible?

We'll sit down with the administration's point man, Treasury Secretary Tim Geithner.

Then, the president tells Congress to come up with its own plan. But Republicans are making an offer Democrats can refuse. We'll find out what the GOP plans could do before the financial markets open in Asia from the top Republican negotiator, Speaker of the House John Boehner.

Geithner and Boehner only on "Fox News Sunday."

Plus, what happens if there is no deal? Will there be market melt down? Who will get the blame?

We'll ask our Sunday panel about the political and policy realities.

All right now on "Fox News Sunday."

And hello again from Fox News in Washington.

It is now nine days and counting until the U.S. hits the debt limit. With the collapse of talks about a grand bargain, can the nation's leaders come up with a last ditch plan to raise the debt ceiling before August 2nd?

We'll talk John Boehner in a moment. But, first, another key figure at the center of the talks, Treasury Secretary Tim Geithner.

And, Secretary Geithner, welcome to "Fox News Sunday."

TREASURY SECRETARY TIM GEITHNER: Good to see you, Chris.

WALLACE: Congressional Republicans are working on a two-stage plan that would cut over a trillion dollars in spending right away and raise the debt ceiling into early next year, then there would be a mechanism for more cuts that if approved, the debt ceiling would be raised past the 2012 election.

Will the president sign that into law?

GEITHNER: Chris, let me tell you what we're trying to do, what the president is trying do, is, first and most important, we have to lift this credit default from the economy for -- you know, for the next 18 months. We have to take that threat off the table through the election. But we also want to try to make sure we come together and make some choices, lock in some long-term savings to help get our fiscal house in order. We need to do those things so that Congress can get back to the business of trying to do things to make economy stronger and get more Americans back to work.

WALLACE: So, for lack of a better word, I'll call it the Boehner plan. Will the president veto that?

GEITHNER: Well, again, let me sit back for one second.

There are two types of plans on the table now. One is the framework that that president and the speaker of the House have been talking about for the last several weeks now.

WALLACE: I thought that's dead.

GEITHNER: No, they're talking still because again, both the president the speaker believe that the best thing we can do is put together a very substantial contribution to getting our fiscal house --

WALLACE: So, you're saying that so-called grand bargain is still alive?

GEITHNER: Well, I wouldn't say it that way. I'm just saying there's two approaches before us. Now is again, something like that comprehensive balance, entitlement savings to secure Medicare and Medicaid for the future with tax reform that would generate revenues, help us solve this problem.

But there's also some talk about a plan that Senator McConnell and Senator Reid both put forward. It would also take default off the table and put in place a special committee with special powers to try to move legislation to achieve that same outcome.

Now, you can solve this problem lots of different ways. But two key things are, we take default off the table, the federal default off the table, through the election and we put in place a frame work of tough reforms and forces congress to act relative -- you know, we don't want to fall behind the curve with this and it's important we not just take default off the table but we demonstrate to the world that we can start to make a change to get --

WALLACE: All right. So let me go with this a different way. A plan that would only guarantee cuts and a debt ceiling in early next year?

GEITHNER: It makes no sense. I mean, again --

WALLACE: The president will veto it?

GEITHNER: Again, he said he's very clear about that. But let me explain why that would be irresponsible. I mean, you know, we started this process seven months ago. Here we are seven months later, we're running out of runway. We're almost at the edge. I never thought they would take this close to the edge and let politics get in a way of demonstrating -- well, will we pay our bills on time? It has tens six or seven months.

The idea that we're going to spend another seven months lifting the cloud of default from the American economy, it seems irresponsible approach. It would be bad for the economy. And we don't think that makes sense -- and there's no reason why we have to do it that way.

WALLACE: Secretary Geithner, here's what I don't understand. What you're saying, I understand trying to get past 2012. You certainly don't want to do this again. There also are some political considerations.

If I may the question, sir. There are some political considerations as well. But what you you're saying is, you would insure hitting debt ceiling now just to make sure you don't possibly hit the debt ceiling early next year?

GEITHNER: Let me say to you --

WALLACE: You can get the thing that will kick this can down the road for six months, why aren't you grabbing on that like a life preserver?

GEITHNER: Because we're trying to do something more important. Again, we're trying to do avoid not just default today, but the specter of default in the future.

WALLACE: But you may end up with default today, sir.

GEITHNER: No, we're not going to end up there. Remember, the speaker of the House and Senator McConnell have been absolutely clear, they are not going to let this country default, they are not going to put us in a position where the members of their party who have been threatening default, some of them praying for default. Really, it's a remarkable thing. They're not going to let that happen. And I commend for that.

But we're trying to do something more important than just getting to the second. We're trying to make sure we can -- we will lift the threat of default from the American economy for the next 18 months and we are trying to put in place a frame work that forces Congress to make some tough choices, not just on tax reform, but in the types of savings we need to get our fiscal house in order.

WALLACE: How do you think the markets and credit rating agencies will react if Speaker Boehner -- we'll talk to him in a few minutes -- announces a plan, short-term cuts, short term debt ceiling increase, with a mechanism for longer cuts and longer debt ceiling increase next year?

GEITHNER: Again, what the markets are going to look at and the rating agencies have been very clear, they're going to look at not just whether we successfully avoided a default crisis, which I'm very confident we will. But they're going to look at whether we lift the cloud of default off the American economy and they're going to look at the quality of savings and reforms we put in place so that we can demonstrate to the world and American people we're going to go back to living within our means.

Now, remember, from the beginning, it's been clear that you're going to need Democrats and Republicans in both houses of Congress to get this done. You cannot do it with just Republicans in the House because you have to get it through the Senate. The Speaker understands that and the Senate understands that. And that's why as you heard yesterday, the leaders have come together to try to figure out today what of type of arrangement is going to work and get through both houses that the president can sign.

WALLACE: How do you think the markets will react in Asia starting this afternoon, in United States staring tomorrow morning if at the end of this day, at the end of another weekend, there's no plan at all?

GEITHNER: You know, you can't ever tell what markets will do. So far, markets have very confident that America is going to do the right thing.

WALLACE: It's going to run out at some point.

GEITHNER: Yes. But at some point, again, we are worried. Now, again, we are very close to the deadline, and the longer the politicians take it, the more risk we face that people start to look at us and they sort of wonder whether this place can work again. Again, the support that the leaders that they can find a way to make the compromises necessary to make this work.

WALLACE: I want to ask you about one specific part of the negotiations up to this moment. Speaker Boehner's office says that he agreed with you last weekend on a deal to raise revenue $800 billion over the next decade and that the president, the Boehner's words, moved post the goalpost during the course of the week by demanding another $400 billion.

Simple fact question: Did you have an agreement with Speaker Boehner last Sunday in a meeting in White House Chief of Staff Bill Daley's office, $800 billion in new revenue?

GEITHNER: We did not, but we were close. At that point --

WALLACE: You did not have an agreement?

GEITHNER: No, we did not.

At that point on that Saturday, we were apart on two very important things. One is what type of revenue we're going to get through tax reform as an objective. That's the thing you mentioned, but we're also apart on the deep of savings that Speaker Boehner thought we should put in the deal on Medicaid, for example.

WALLACE: But on the $800 billion figure, you had agree on that?

GEITHNER: You know the ways negotiations work, Chris, nothing is done until everything is done. And at that point, again, we were getting closer, but we weren't quite done yet. And, again, there's still a chance that -- you should ask the speaker, of course, but there's still a chance that that may prove the best way to get the votes. And the president believes -- the speaker does -- the framework like that will be the best.

But we got our options, too, now.

WALLACE: You keep bringing up the grand bargain.

GEITHNER: Well, you know, again, president of the United States believes that the best thing we can do for the economy is to put in place now a comprehensive balance set of savings, tax reform, that can demonstrate to the world we can get our fiscal house in order. And if we can do that now, then we can get Congress back to business in trying to figure out how to make the economy stronger in the short term and get more Americans back to work.

WALLACE: I know you're not going to want to talk about this. But I'm going to ask you a straight question and I'm counting on a straight answer.

The president said Friday he has talked to you about what adjustments may have to be made in the case of default. Your office announced that you met with Fed Chairman Bernanke and the head of the New York Federal Reserve on Friday. What's your plan for default?

GEITHNER: Our plan is to get Congress to raise the debt ceiling on time.

WALLACE: That's not a plan.

GEITHNER: That's their plan, too. That's what's always happened. It will happen this time, too.

We do not have the ability, Chris, to protect the American people from the consequences of Congress not taking that action.

WALLACE: But the president said that you have discussed what adjustments will have to be made if you go into default.

GEITHNER: Right. Again, I want to emphasize. Just remember, this is the United States of America. We write 80 million checks a month. There are millions and millions of Americans that depend on those checks coming on time.

Not just people from the military, but people who get Social Security benefits, Medicare and Medicaid benefits. And we cannot those payments at risk and we do not have the ability to limit the damage on them if Congress fails to act in time.

WALLACE: You have been saying this for months. And I must say, it made more sense when you said in April than when you were saying it in July. What's your plan? It would be irresponsible not to have a plan. The president says you have a plan. What is it?

GEITHNER: Again, we will do everything we can to mitigate the damage. But I want to be very clear, Congress will be putting 80 million checks payments at risk of delay and that would not be responsible. Everyone --

WALLACE: You decided who will get paid first and who won't.

GEITHNER: Well, Chris, everyone who's had my job, everyone who's had the president's job, has looked at this set of questions. They had to do this over and over again. And they've reached the same judgments we've reached, which the only option for the country and I believe that Speaker Boehner and Senator McConnell understand this. There is no other option available and I don't think they're going to put the American people in that position.

WALLACE: I'm going to ask last one time and then I'm going to move on. Have you made plans as to who will get their checks and who won't get their checks?

GEITHNER: Chris, we are doing the responsible thing but that's not -- the important thing is to recognize that we do not have the ability -- only Congress has the ability to make sure that people get the payment on time. Only Congress has the ability to demonstrate that we're going to pay our bills as a country. We're going to meet all our obligations on time.

WALLACE: All right. The president talks about the importance of getting serious about our national debt. But I want to look at the record with you, Mr. Secretary, and let's put it up on the screen.

In December, the president's own debt commission called for $4 trillion in cuts. Mr. Obama didn't endorse any of them. In January in his State of the Union speech, he didn't mention the word debt until 35 minutes in. In February he proposed a budget to cut the deficit only $410 billion over 10 years. The Senate rejected that 97-nothing. And in April, he offered another plan that was so fuzzy, the head of the CBO said we don't estimate speeches.

Meanwhile, Mr. Secretary, Republicans have offered specific plans to deal with the national debt.

GEITHNER: Plans that would devastate the economy, devastate the country, because in --

WALLACE: Well, in your opinion. But they at least had a plan. They had the Ryan plan. They had cap, cut and balance.

GEITHNER: They did.

WALLACE: You guys have no plan.

GEITHNER: Well, hold on. First, it's not fair. In April, the president of the United States put out a framework that would do $4 trillion in deficit reduction over roughly the same period of time.

WALLACE: But the CBO director said it's so fuzzy, he couldn't even square it.

GEITHNER: And he has been spending every day, every week since then negotiating with the Republican leaders and Democratic leaders on a framework that can pass and work. Now, remember --

WALLACE: But why have you had no plan?

GEITHNER: Chris, that's not fair. I know the Republican leadership says it. But it's just not true.

WALLACE: The CBO, the partisan head of the Congressional Budget Office said we can score a speech.

GEITHNER: Chris, let's do it your way, OK? The Republican plan that passed the House of Representatives and the Republican brought forth in the Senate would, in the estimate of the CBO, require beneficiaries of Medicare to pay $6,500 a year more, $6,500 a year more for Medicare benefits that they do today.

And why are they doing that? They are doing that because they want to preserve -- I don't think the speaker does say this -- but they want to preserve tax cuts that benefit the top 2 percent of Americans that we simply cannot afford.

And what they did and they demonstrated in their plans -- and I give them credit for this -- that if you try to our budget without revenues, with tax reforms that raises revenues, then you are forced to put in place exceptional harsh cuts not just for Medicare beneficiaries but for Medicaid. And remember this country, this great nation with our great resources today, one in eight Americans are eligible for food stamps today. Forty percent of Americans born today are born to families eligible for Medicaid.

The idea that you can ask the American people to balance this budget on the backs of the elderly and the most vulnerable with no burden through tax reforms on the most fortunate Americans is fundamentally unacceptable. It's not going to happen. They knew it. It's not going to become law.

And we have mad so much progress over the last four month with the Republicans and trying to build consensus for a more balanced approach -- and I give the speaker a lot credit for that.

WALLACE: Let's turn in the time we have left to the economy. Last August, you wrote an op-ed article in The New York Times and the headline, as you can see there, was welcome to the recovery.

GEITHNER: That was not our headline. That was The New York Times headline, deeply unfair to the substance of what I wrote.

WALLACE: Well, here's what you did say. Let's put it again on the screen if we can, because what you did say is, "we are on the path back to growth." Those are your words.

GEITHNER: And it's true. Absolutely accurate.

WALLACE: And you stand by that?

GEITHNER: Absolutely. Absolutely. At that point when I wrote that op-ed, the American economy strengthened. It grew more than 3 percent.

WALLACE: You were just talking about, what, that week? Or you weren't I mean

GEITHNER: But no, it was absolutely right. If you look at what happened to the American economy --

WALLACE: But let's look, if I may, sir. Let's look at the record.

Since President Obama took office, the nation has lost a net of 2.5 million jobs. The unemployment has jumped from 7.8 percent to 9.2 percent. The nation gained only 18,000 jobs in June. And Goldman Sachs now projects that by the end of 2012, the unemployment will still be over 8.75 percent.

Question: That's your idea of the path to growth?

GEITHNER: Chris, the American economy is still suffering undeniably from the tragic after-effects of the crisis this president inherited. But we've now been growing for more than a year and a half. We have over 2 million private sector jobs created since job creation started again, faster and more than the last two recoveries. Things are healing. It's going to take more time, though.

Growth is slower than we would like and that's why it's so important that we get this budget done in a sensible place, because we want Congress to turn the business of doing things to help the economy get stronger. We've got a long way. There's no doubt about it. But we're in a much stronger position today as a country than we were not just three months ago, not just six months ago, not 18 months.

WALLACE: You think we're in a stronger position in the economy today than --

GEITHNER: Undeniably.

WALLACE: Let me finish. In a stronger position in the economy today than you were three or four months ago when you were growing hundreds of thousands of jobs?

GEITHNER: Absolutely, because with time, more American are getting back to work. The economy is growing. American businesses are investing again. Exports are getting stronger. That's all going well.

Now, the growth slowed the first half of the year, slow because oil prices went up. We had a lot of bad weather. State and local governments are tightening their belts. Japan had catastrophic crisis, and those things all cause growth to slow.

And this spectrum of default that Republicans have put over the country is hurting the confidence of average Americans. And that's why it's so important to take that off the table definitively, not just for August 2nd, but for the next 18 months, as long as they can.

WALLACE: One last one question I want to ask you about that.

You talk about growth. I want to put up growth numbers over the last the few months and going forward. Growth -- GDP growth in the first quarter was 1.9 percent. Goldman Sachs has scaled back its estimate for growth in the second quarter from 2 percent to 1.5 percent -- in other words, less than in the first quarter. And in the third quarter, from 3.25 percent to 2.5 percent.

That's your idea of an economy that's growing stronger?

GEITHNER: No, the economy -- still a very tough economy. And growth slowed for the reasons we said. And if Congress makes some sensible decisions right now, lifts this cloud of dysfunction, of default, off of the American economy, then it can turn back the business of doing things to make the economy stronger.

But this economy is healing. It's recovering. We're going to get through this. It's going to take more time, but that's why it's so important as the eyes of the world are on us that Congress demonstrates they can come together and makes some tough decisions now.

WALLACE: Is 8.75 percent unemployment a year -- more than a year from now, 15 months from now, does that jive with your recommendation or your analysis?

GEITHNER: Chris, it depends on how fast we grow. That's what it depends on. It depends on the confidence that the leaders of Congress, not just Democrats but Republicans --

WALLACE: If you look at some projections right now, it's 8.75 percent --

GEITHNER: I don't do forecasting, but I would say that the best forecasters in the country say that they believe growth is going to get stronger going forward. I think that's likely, as long as Congress makes some good decisions, but it's going to take it us a long time to heal the damage caused by this crisis. We're making a lot of progress. We're in a much stronger position today. It's going to take more time.

WALLACE: Secretary Geithner, we want to thank you so much for coming in today. We'll be watching to see what all of you come up with this week.

GEITHNER: Good to be here, Chris.

WALLACE: Thank you, sir.

Up next, the president has asked Republicans if the will say yes to anything. We'll find from the speaker of the House, John Boehner.

(COMMERCIAL BREAK)

WALLACE: Joining us now to continue our discussion of the debt crisis is the speaker of the House, John Boehner. Mr. Speaker, welcome back to Fox News Sunday.

SPEAKER OF THE HOUSE JOHN BOEHNER: Chris, you know, it's good to be here. Think about this remarkable conversation we are having. A year ago, we just passed a health care bill, we had a stimulus bill that was passed the year before. It was all about how much more spending Washington could do. And here we are in the six months after a new Republican majority, and all the discussion is about how many trillions of dollars we are going to cut. This really is a pretty remarkable change here in Washington, D.C.

WALLACE: All right. Having said that, you had a meeting, a conference call with the Republican leaders yesterday in which you said, you want to be able to announce a plan, the framework of a plan today before the markets in Asia opened. Are you going to announce that plan?

BOEHNER: I am going to continue to work with my congressional colleagues in both parties and my House Republican conference to try to develop a framework within the cut, cap and balance effort that the House passed this past week. I do believe that such a framework could come together. But it is in not in place as we sit here.

WALLACE: Will you announce a Republican plan or will you only announce a plan if you have buy-in from the Democratic leaders on Capitol Hill?

BOEHNER: I think a preferable path would be a bipartisan plan that involves all of the leaders, but it is too early to decide whether that is possible.

WALLACE: You just heard the reaction from Treasury Secretary Geithner, he was speaking for the White House. He was also speaking from congressional Democrats. He says this idea which I know that you and the Senate Republicans are working on, of a two-stage process, where there would be a trillion dollars plus in cuts, debt limit increase until early next year, and then a commission to find more cuts and also if it's approved, raise the debt limit further, is unacceptable.

BOEHNER: Well, there will be a two-stage process, it's just not physically possible to do all of this in one step. Having said that, Chris, I know the president is worried about his next election. But my God, shouldn't he be worried about the country? We have got a budget deficit of $1.5 trillion. We're borrowing 42 cents on every dollar we spend, we have $14.5 trillion national debt. It is time to get serious about stopping the spending here in Washington, D.C.

WALLACE: So are you suggesting you might pass a short-term plan in the House and in effect, dare the Senate, dare the White House to block it?

BOEHNER: Chris, this is about what is doable at the 11th hour. Remember this, you mentioned this to Secretary Geithner. The House has done its work. We passed a budget, we passed a plan.

WALLACE: I know but they have been defeated.

BOEHNER: We passed cut, cap and balance.

WALLACE: But they have been defeated, sir.

BOEHNER: And not one time in this whole process have the Senate Democrats or the White House passed a budget, put a budget out there, or even put a plan out there. The conversations I was having with the president, in case the Senate didn't pass cut, cap and balance, there was never any plan from the White House. The whole plan came from us. We laid out the framework. And at some point they have got to lay their cards on the table.

WALLACE: Well, you are the one in your conference call yesterday who brought out the idea of we have got to do something before the markets open in Asia this afternoon, Monday morning in Asia. How do you think the market are going to act if the end result, the headlines at the end of the day and in tomorrow morning's newspapers are, no deal?

BOEHNER: The American people are asking the question, where are the jobs? And while Asia may be important, this is about American jobs and the American economy. And if we don't do something serious about controlling our debt, it is hanging over our entire economy like a wet blanket. That's why I believe that taking serious steps towards solving this problem will in fact breed more confidence in our economy and help create jobs here.

I am going to do my best to work with my congressional colleagues, my House Republican colleagues, to be able to put a framework out there today to begin to remove this wet blanket.

WALLACE: I just want to pursue this again. You talked about putting a framework out today. You are saying you would not do that unless you have Democratic buy-in?

BOEHNER: I would prefer to have a bipartisan approach to solve this problem. If that is not possible, I and my Republican colleagues in the House are prepared to move on our own.

WALLACE: Today.

BOEHNER: Today.

WALLACE: And that would be a Republican plan and it's along the lines I've talked about, a two-step process. Cuts now, debt limit increase into early next year?

BOEHNER: I don't want to get into all the details of what it may or may not be. If I have the details, Chris, and ready to announce it, I would be happy to share it with you. We are not there yet.

WALLACE: The S&P ratings agency says that it will consider downgrading our debt even if the debt limit is increased if you end up with a short-term deal that indicates Washington isn't serious about dealing with this issue. Isn't that a concern, that the markets could look at a trillion-dollar cut and a short-term deal that kicks the can down the road into early next year and you get another market meltdown?

BOEHNER: I think it is important that we deal with our long-term problem. It's serious. Washington spending has been out of control. And what has happened over the last two years really shows how much out of control it got. Trillion-dollar stimulus plan, a health care plan that we can't afford, all of this extra spending that has not worked. And the spending binge has to stop. And our efforts all year have focused on trying to stop it.

And as I look at trying to put together a plan with my colleagues, I am going to work with them in the framework of cut, cap and balance, because those are the three things that have to happen if we are going to instill confidence in our economy.

WALLACE: But when you say cut, cap and balance, the Senate resoundingly tabled the idea of a balanced budget amendment. You are not going to insist on that again. Whether it's a good plan or not.

BOEHNER: I continue to believe that a balanced budget amendment is the greatest enforcement mechanism to bring Washington spending under control.

WALLACE: But you are not going to make that a condition.

BOEHNER: I am going to continue to develop a framework within the principles of cut, cap and balance.

WALLACE: I want to go over one part of the grand bargain you were negotiating with the president and the White House, and I went over this with Secretary Geithner. You say, you said in your Friday news conference that you agreed to $800 billion in new revenue last weekend in a meeting with Secretary Geithner, and that the president moved the goal post. You heard his response -- well, we really didn't have a deal. Did you have a deal with Secretary Geithner?

BOEHNER: Last Sunday there I thought there was an agreement of $800 billion of new revenue coming from a flatter, fairer tax system that would get our economy moving again, employ more Americans, and bring more revenue to the federal government. And I believed that we could get there. On Tuesday, the president said they needed more revenue. Mr. Cantor and I told the president no. Wednesday they said they needed more revenue. We said no. Thursday, we need more revenue. We said no. Friday afternoon, when the president called me and demanded $400 billion in more revenue, there's no way you can get that out of tax reform other than raising taxes on the American people.

It was time for me to step back and to begin to figure out what is the path forward. Because it was not just the additional revenues that the president wanted. Their willingness to make fundamental entitlement reform, real cuts in spending, they continued to resist at every turn.And that's when I'd finally decided it was time to say no, it was time to reach out to my fellow congressional leaders and my House Republican colleagues and develop a congressional plan to deal with this problem.

WALLACE: I want to pick up on one part of this because it is causing some heartburn for frankly House Republicans. What you're just saying is that despite your promise not to raise tax revenue, that you agreed to $800 billion more as part of this debt deal through tax reform, lowering all the rates, but also closing loopholes and ending deductions. You'd agreed to $800 billion.

BOEHNER: Yes, because I thought we could get new revenues out of a growing economy that had more Americans working, more Americans paying taxes, and the fact that a fairer, flatter tax code means that we would have had a more efficient system of people understanding what their tax obligations were and our ability to collect what was due.

Between the two, I believe that we could accomplish $800 billion without raising taxes.

WALLACE: That was raising taxes. It wasn't raising tax rates, it was raising taxes.

BOEHNER: It was not raising taxes. If you look at how it was outlined, we agreed the taxes would have to be reduced from the current law, current policy all the way down $2.7, $2.8 trillion from what the current law is. Yes, it is $800 billion over what the current policy is, but I thought that we could achieve that amount of money through fundamental tax reform on the corporate side and personal side.

WALLACE: There was a very interesting development today, and I want to pursue it with you, a couple times, Treasury Secretary Geithner seemed to raise the possibility of the grand bargain again. And I know some administration officials are saying, well, would Boehner go back and accept the $800 billion dollars?

BOEHNER: I don't know. It may be pretty hard to put Humpty Dumpty back together again. But my last offer is still out there. I have never taken my last offer off of the table and they never agreed to my last offer.

WALLACE: So your last offer, $800 billion in new revenue and entitlement cuts, spending cuts, that's still on the table.

BOEHNER: It is still on the table. They know what my last offer was. But, again, a better path forward at this moment is working with my bipartisan congressional leaders and my Republican colleagues in the House to put together a process that is doable.

WALLACE: There is considerable criticism among House Republicans, and I'm sure some of them are going shake their heads watching what you've just said, that you are too eager for this grand bargain. You're too eager to make a deal with Barack Obama.

BOEHNER: What I am eager for is to do the right thing for the country. I didn't come here to be a congressman, I came here to do something on behalf of my country. I didn't want to be a speaker of the House because I needed a big fancy job, I wanted to be speaker so that I could lead an effort to do the right things for our country.

We have a spending problem. And I am going to do everything I can to try to tackle this problem in as big a way as I can because it is the right thing for the country.

WALLACE: Even if it causes heart burn in the House GOP caucus?

BOEHNER: This is about doing the right thing for our country.

WALLACE: You now say that you and the president are from different planets, you have two entirely different views of the world. What made you ever think, what makes you seem to think that even now that you can make a deal with this president with his views on trillions of dollars in spending, entitlements and taxes?

BOEHNER: Well, Chris, I was born with the glass half full. I'm the optimist. And it is about trying to find common ground. Yes, I understand the president feels that we need a bigger government and more spending here in Washington. I believe allowing the American people to keep more of that money is the best way to create jobs and grow our economy.

But having said the fact that we're on -- it is almost like we come from two different planets. My job on behalf the country is to find as much common ground as we can to help move the country ahead.

WALLACE: But Democrats are saying, and you heard this implied by Tim Geithner just before you, that you end up looking bad with voters because you walked out of the talks twice. And you are willing to risk default because you want to cut Medicare and Medicaid and not cut tax for the wealthy.

BOEHNER: I'm not going to get involved in all that political sniping. I am interested in a solution to the problem we face. I don't want to see default. I don't frankly want to get anywhere close to it.

WALLACE: We are close to it now.

BOEHNER: It is bad for our economy and bad for our country. And so I am trying to find a common ground that doable in the time remaining.

WALLACE: Well let me just ask you, and that's the last question, sir. How does disappointed are you, because according to your plan, as we understand it now, and it may change, a trillion in spending cuts in the short term. How disappointed are you that after months of talking, after this urgent deadline, that it seems now that maybe the most that Washington can come up with when you are going to spend $46 trillion over the next decade, is $1 trillion in spending?

BOEHNER: After over six months conversations with the president about doing the big deal, about taking a big step in the right direction, it is pretty clear to me that they are just not willing to do it. That the next election matters more than doing what is right for the country.

I am not worried about the next election. I told the president months ago forget about the next election. If we do the right thing for the country, we'll not have to worry about who is going to get elected and who isn't.

WALLACE: Speaker Boehner, I want to thank you always -- as always for coming in. And we'll see how the world turns this week, sir.

BOEHNER: We sure will.

WALLACE: Coming up, our Sunday panel and how the debate over the debt ceiling playing out and what happens next.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

PRESIDENT BARACK OBAMA: I think that one of the questions that the Republican Party is going to to have to ask itself is can they say yes to anything?

BOEHNER: It's time to get serious. And I'm confident that the bipartisan leaders here in the congress can act. The White House won't get serious, we will.

(END VIDEO CLIP)

WALLACE: President Obama and Speaker of the House John Boehner in extraordinary news conferences Friday night over the proposed grand bargain that fell apart. And it is time now for our Sunday group: Brit Hume, Fox News senior political analyst; A.B. Stoddard of The Hill newspaper; Bill Kristol of The Weekly Standard; and Fox News political analyst Juan Williams.

And we want to know, Juan has a new book out called Muzzled about his dismissal from National Public Radio and what he calls the assault on honest debate in this country. Please check it out. And Juan congratulations.

WILLIAMS: Thank you, Chris. WALLACE: I've read the first chapter. It didn't mention me, but it still was very interesting.

(LAUGHTER)

WALLACE: You know, I had a very carefully framed question, Brit. But let me ask a much simpler one. You heard what Geithner said, you heard what Boehner said, what do you make of it?

HUME: Well, it is striking that the House has acted and passed a plan, and the Senate has basically refused to take it up and voted it down.

What you see here is an interesting combination of events, because the president really hasn't stated a position or set forth a scorable plan or any of that, and these House Republicans have basically done that. And what you are seeing here is a very kind of a double standard, because when the House acts, everybody said, well, you know, that can't pass, that won't pass, but the Senate has done nothing. They haven't passed a budget. They haven't passed--.

WALLACE: They rejected the president's budget 97-zero.

HUME: 97 to zero. They haven't done anything. But so every time the House acts, everybody says, well, you know, this can't pass anywhere else. Well, isn't it time for somebody to step up with an alternative plan? And the thing that is striking about this, is this is a very close parallel to what happened back in the Clinton years, when we had the partial government shutdown, and that pattern is very similar. And in that case, the Republicans got all the blame. And I have a sense here that there is a sense of confidence among the Democrats in the White House and Congress that if we end up with this sort of a situation where you simply have to close down parts of the government because there is no money, that the Republicans will get the blame. That's what looks like to me.

WALLACE: So I must say, one difference though from the partial government shutdown -- we have had those before -- we have not gone, exceeded a debt limit before, which I think would be somewhat uncharted territory in terms of the reaction of the markets. What is going to happen?

STODDARD: Well, that's what's so interesting. What happened this weekend is the House Speaker John Boehner cut President Obama out of this process. He's moved it to the Hill. It's going to be between congressional leaders. As he continues to stress, he would like it to be bipartisan, and if it can't be, he's going to move on anyway.

So when he says we have passed a debt increase, we have passed to avert default, we have passed a budget, the Democrats have no plan, and if the president won't get serious, we will -- he is really taking control of the message back, where I think Republicans have lost it for almost two weeks.

At this point, does he have 218 votes or something? We don't know. The Democrats position, as Secretary Geithner made clear, is going to be anything that is short-term, six months, doesn't get us through the next two years, anything that leaves as he said, quote, "the cloud of default" over this fragile economy, is going to lead to a downgrade by the ratings agencies, interest rates hike up, the consumer runs and hides, more job loss, and serious problems for our economy. And you know, we'll see what happens to the markets tomorrow and we'll see if that is a compelling message from the Democrats, enough to scare Speaker Boehner back to the table to a long-term deal. But what he's saying is, I have the short-term deal in my pocket. Something will come together in the next four days, and I am sick of having these discussions with the White House where they move the goal posts.

WALLACE: So, what do you think happens, Bill? Do you think -- because Boehner said one thing at one point and another thing at another point. Do you think that he is prepared to just have the House pass the short-term deal, $1 trillion in cuts, kick the can down the road, raise the debt ceiling into early next year with this idea of a commission to look at it, but basically passe. You don't want default? Here is a plan to keep you out of default for six months, and dare the Senate, dare the White House to veto it, to block it.

KRISTOL: He would prefer to make a deal with the Senate Democratic leader, Harry Reid, and that is what happened yesterday. But there's really an amazing moment there, that meeting in the White House yesterday morning. They walked out, and the speaker said, I am going to continue meeting only with congressional leaders. And they had that meeting late in the afternoon yesterday on the Hill. And I asked one of Speaker Boehner's aides, I said, who represented the White House at that meeting? I've been in the government and the White House always is represented at these meetings on the Hill. No one. It was the four congressional leaders alone. They have decided -- and I think Harry Reid sort of believes this, though he can't quite say it -- President Obama and Secretary Geithner are part of the problem, not part of the solution, and they are now going to try to work out a deal on the Hill, cutting the president out.

I think Boehner would certainly prefer to get a deal with Harry Reid. Pelosi is putting pressure on him. It's hard, where they can get this two-stage agreement, the $1 trillion first with spending cuts, a second one with half-trillion dollars, that will be mostly spending and entitlement cuts, some revenue increases that don't come from tax hike increases, and do that in two stages with two votes. The second vote is sort of guaranteed so that markets don't get all disrupted.

I think that's doable. They can do it either as a House Republican bill that then goes to the Senate, or they can do it in negotiation with the Senate Democrats first.

But the big story here for me is the bipartisan willingness to walk away from President Obama.

WALLACE: But the other part -- there may be bipartisan willingness to walk away, but the other part of that is that last night after they heard the Boehner plan, Harry Reid, the Senate majority leader, and Nancy Pelosi, the Democratic leader in the House, both said no.

WILLIAMS: Absolutely not. And what they are saying is, that what you -- I thought it was a very revealing moment that you had, Chris, with Tim Geithner here when Geithner said he thinks there is some Republicans who are praying for default. That's his language. And you get the idea the White House, to the extent that, you know, Bill was talking about the White House as the problem. The White House has just said, you know, there is some Republicans who just are intransigent, stubborn, resistant to making a deal on any circumstance because they don't want added revenue, they don't want a tax hike.

And what we saw this week from the Democrats, you talk about the White House. The Democrats flew over to the White House to say, what are talking about? You are willing to make significant cuts in terms of Medicare, Medicaid, Social Security? You are putting our political fortunes at risk. This is not what we want. You saw MoveOn, you saw AARP, you saw AFL-CIO, SEIU, all engage their members to absolutely zoom in on Congress with phone calls and lobbying, to say stop the president from giving up everything to the Republicans.

One last point here. I am amazed you heard the speaker of the House say, you know, we have moved the goal posts in terms of a president who didn't want to make significant cuts, who is now willing to make significant cuts. Why don't Republicans just say, you know, we have won this fight. It's time to move on and not push the country over the edge.

WALLACE: Well, that's one view.

We're going to take a break here and we're going to continue the conversation. One of the interesting things that came out from both Geithner and from Boehner is the grand bargain, it's not dead. When we come back, more on the debt crisis.

(COMMERCIAL BREAK)

WALLACE: We are back with the panel, continuing our discussion about the debt negotiations.

And I have to, Brit, the most interesting aspect both from Boehner and Geithner, was that neither of them was willing to put the final nail in the coffin the grand bargain. Geithner left it open. And Boehner, when I offered it to him, said my deal, his deal, prior to the president demanding $400 billion more, is still on the table. Do you take that seriously?

HUME: I do. But I think it is a practical matter. I think they both are willing, but I think the obstacles to it are too great and time is too short for them to get there. I just think it is too much.

First of all, the components of it are so numerous and the amount of legislating that needs to be done to get it in place is so extensive that I just don't think it is feasible to pass it in time. We are going to need to do something ahead of that, if we can ever get that done. The other thing that is striking about this is, you know we have the ratings agencies out there issuing these dire warnings and all of this. Remember, now, what are talking about here is to enact something that would keep the government going for a while. And there are going to be plenty more bites at this apple. I mean, the Senate never passed anything. There is no budget. And there will be another day of reckoning down the road. I mean, this is simply a measure to keep the government open for a while. But there is just no real budget.

I mean, we have a long way to go and we're going to be fighting this fight, it seems to me, again and again, which is why I think House Republicans would be wise to say let's take what we can get on this and go along with our leader. The only worry I have for the Republicans-or the thing I think they should be worried about-is you pass this short-term, you know, six months or so, uh, bill, that keeps the government going. And with it a batch of spending cuts. And it gets rejected by that Senate and or vetoed by the president and we have this shutdown. Even though the Senate has never passed anything; the president hasn't proposed anything specific that we can see. And the House will have acted, be the only body that really has acted. And still it is possible, it is the scenario we saw back during the Clinton years, it plays out again, for the Republicans to get all the blame.

WALLACE: I want to go back, A.B., to this question about the grand bargain. Do you think it is possible? And I asked Boehner and he said it is pretty hard to put Humpty Dumpty back together again. But both of them-but maybe I'm reading to much into it-you know, were suggesting let's go back to last Sunday when Boehner and Geithner were sitting in the chief of staff Bill Daley's office in the White House. And they agreed on the $800 billion, or came close to an agreement. Were talking about major entitlement cuts, roughly $3 trillion, do you think it is possible to put that together?

STODDARD: I think it is possible to put that together because the president said a few days ago, when it was viable, he would agree to a short term debt ceiling increase, if they knew that they were, you know, they were at the table for the grand bargain, and they were in agreement about putting the details together.

What you have seen several times, since Friday, is statements from administration officials saying it was a final number, they were just simply using it as a bargaining chip. They really are actually trying to say they are sorry in so many ways. They have said it many times that they just put that extra $400 out there as a negotiating tool-

WALLACE: That is not what Boehner said.

STODDARD: He did? I-

WALLACE: Boehner said the president brought it up. Brought it up and then insisted on it.

STODDARD: I understand that but it makes me believe that if the administration backs down from the final $400 and says we'll stick with the $800, that Boehner might come back to the table. This question of whether or not a short-term patch, even if it is six long months, really still keeps default alive, and that begins to show up in the markets, is really a problem for Republicans. They read the polling that came out last week that shows Americans are increasingly afraid of default. Those numbers are moving dramatically. It was 70 percent against raising the debt ceiling. Now we have a plurality for raising the debt ceiling. People wrap around-

WALLACE: So you think Republicans also don't want to get this passed the election?

STODDARD: I think Republicans also want to get it past the election. And you have actually heard-there are many freshmen who will tell you. I didn't want to take one of these votes, I don't want to take three of them.

WALLACE: Let me bring in Bill. And you know this question of going back to the grand bargain. Because as I pointed out to Boehner, there are a lot of Republicans who say, no, tax increases. Now, that has to do with baselines and all kinds of stuff. But here you have Boehner agreeing, the speaker of the House, to $800 billion in new revenue coming from tax reform and closing loopholes. Is he going to be able to sell that in his caucus.

KRISTOL: With the projections of economic growth that they say, I don't know if he could have sold that, but there is not going to be a grand bargain, I believe. Speaker Boehner has wanted one. He thought there was a chance to actually make long-term progress. I think he was wrong. And I think he was proven to be wrong by the president last Friday.

And now the responsible thing for Republicans to do-having already responsibly passed the only actual legislation to lift the debt ceiling-is to pass the kind of two-step legislation the speaker is looking at. And I do not believe that Democrats can (inaudible) that.

I am much less pessimistic than Brit or AB, that the Republicans are going to get blamed for this if they do the right thing, here. And I think they are going to do the right thing. There won't be a grand bargain. What they can do is get some spending cuts, not allow tax increases, and lay the ground work for 2012, and for the election of a president who is willing to get serious about dealing with the debt and the deficit.

WALLACE: Juan?

WILLIAMS: Well, I think part of the sticking point over the last week has been the mechanisms that are in place. If you go to the two- step solution that both Speaker Boehner and Tim Geithner are talking about, the Treasury secretary talking about this morning. And how would you enforce the idea that if you had a commission, with 12 members in place, and said we want you to reform Medicare, Medicaid, Social Security. We want you to make these big cuts. How do you-what do you say to them if they don't make the cuts? Because what have we seen? Even here on the edge of the precipice these guys don't make a deal. So why would they make a deal down the road?

You are going to need some degree of trust, people holding hands. And so far, both sides, the political extremes are block this deal, because both sides say, no. No tax cuts on the one hand and the other hand no cuts to entitlements. That is not real-

WALLACE: Did you hear the triggers they were talking about? The trigger for the Republicans was going to be the decoupling of the Bush tax cuts. And they wanted the trigger or the Democrats to be the Obama individual mandate.

UNIDENTIFIED MALE: They're extremes.

WALLACE: Yes.

WILLIAMS: But that is the thing. What kind of mechanisms would you have?

WALLACE: Thank you, panel. See you all next week. And we'll be right back.

(COMMERCIAL BREAK)

WALLACE: Before we go a reminder to check out "Panel Plus" where our group will pick right up with this discussion, on our Web site, foxnewsunday.com. And we promise to post a video by Noon, Eastern Time.

And that is it for today. Have a great week. And we'll see you next "Fox News Sunday."

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